Tax Saving under Sec 80EE for first time home buyers

First time individual home-buyers can get tax deduction on interest of home loan, under newly inserted section 80EE of the Income Tax Act, applicable for assessment year 2014-15. This is in addition to tax rebate on interest payment of home loan, under section 24.

Eligibility for rebate under Section 80EE

This rebate on home loan interest is applicable only for home loans satisfying the following conditions:

• Loan is sanctioned by a financial institution or housing finance company between 1st April 2013 and 31st March 2014.
• Loan is sanctioned for acquisition of the residential house property.
• Loan amount is Rs. 25 lakhs or less
• Cost of residential house is Rs. 40 lakhs or less. 
• This should be the only house owned by the taxpayer at the time of sanction.

Maximum deduction limit under Section 80EE

• A maximum of up to Rs. 1 lakh can be claimed towards interest payable on home loan in the financial year 2013-14. 
• If interest payable in this year is less than Rs. 1 lakh then the balance can be claimed in the following year.

Illustrative Example

• Let us assume that the total Interest payable for this home loan (over and above the interest under Sec 24) : Rs. 1,00,000/-
• If interest payable in FY 2013-14 is Rs. 65,000 then tax rebate on remaining Rs. 35,000 can be claimed in FY 2014-15.

Other important notings:

• The amount claimed under Section 80EE cannot be claimed for tax rebate under any other sections in any year.

For the purposes of Section 80EE:

• "Financial institution" means a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies including any bank or banking institution referred to in section 51 of that Act or a housing finance company;
• "Housing finance company" means a public company formed or registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes.

Conclusion

It is an amazing opportunity if you are looking for a house in a Type B city for your own residence, since it can save you lot of income tax for you. For the beginners who are just starting off their financial lives, it is a very good start.

Cheers

Manoj Arora

Freedom can buy you what money cannot !!

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